Shenandoah Telecommunications (SHEN)

Overview. Shenandoah Telecommunications Company is a
diversified telecommunications company providing both regulated and unregulated
telecommunications services through its wholly owned subsidiaries. These
subsidiaries provide local exchange telephone services and wireless personal
communications services (as a Sprint PCS affiliate of Sprint Nextel), as well
as cable television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, paging and leased tower
facilities. The Company has the following three reporting segments, which it
operates and manages as strategic business units organized by lines of
business:



Wireless, which provides wireless personal communications services,
or PCS, as a Sprint PCS Affiliate of Sprint Nextel, through Shenandoah
Personal Communications Company, and tower facilities for personal
communications services, leased to both affiliated and non-affiliated
entities through Shenandoah Mobile Company;



Wireline, which involves the provision of regulated and non-regulated
telephone services, internet access, and leased fiber optic facilities,
primarily through Shenandoah Telephone Company, ShenTel Service Company, and
Shenandoah Network Company, respectively, and long-distance and CLEC services
through Shenandoah Long Distance Company, ShenTel Communications Company and
Converged Services of West Virginia; and



Cable TV, which involves the provision of cable television services,
through Shenandoah Cable Television Company in Shenandoah County, Virginia,
and since December 1, 2008, in Alleghany County, Virginia and various locales
throughout West Virginia, through Shentel Cable Company.

The Other category includes the provision of investments and management
services to its subsidiaries, through Shenandoah Telecommunications Company.

In September
2008, the Company announced its intention to sell its Converged Services
operation, and the related assets and liabilities were reclassified as held for
sale in the consolidated balance sheet and the historical operating results
were reclassified as discontinued operations. Depreciation and amortization on
long-lived assets was also discontinued.

The Company
began an auction process with respect to the sale of the Converged Services assets
in the fourth quarter of 2008. The Company determined, both at September 30,
2008 and December 31, 2008, based on its analysis of

13

similar
transactions, comparable values for other companies in the industry, and the
broad range of values indicated by potential buyers during the early stages of
the auction process, that no write-down of the carrying value of the net assets
held for sale was required.

Subsequently,
in connection with the preparation of the accompanying financial statements,
based upon changes in the marketplace for this type of asset and further
developments in the auction process, the Company has determined that the fair
value of Converged Services has declined from earlier estimates. Accordingly,
the Company has recorded an impairment loss of $17.5 million ($10.7 million,
net of taxes) to reduce the carrying value of these assets to their estimated
fair value less cost to sell.

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate), as well as cable television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, and leased tower facilities. The Company has the following five reporting segments, which it operates and manages as strategic business units organized geographically and by line of business:

telephone, which involves the provision of regulated and non-regulated telephone services, through Shenandoah Telephone Company;

•

mobile, which involves the provision of tower leases and paging services, through Shenandoah Mobile Company;

•

cable television, which involves the provision of analog, digital and high-definition television services, through Shenandoah Cable Television and Shentel Cable Company;

•

other, which involves the provision of Internet, network facility leasing, long-distance, CLEC, and wireless broadband services, through ShenTel Service Company, Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel Communications Company and Converged Services of West Virginia, and the provision of investment and management services to its subsidiaries, through Shenandoah Telecommunications
Company.

During the third quarter of 2005, Shenandoah Valley Leasing Company changed its name to Shentel Wireless Company to record the activities associated with the Company’s Wireless Broadband Group. During the fourth quarter of 2006, Shentel Wireless Company terminated all but one contract to provide wireless services, transferred that contract to Shentel Converged Services, Inc., and ceased operations.

The Company is the exclusive provider of wireless mobility communications network products and services on the 1900 MHz band under the Sprint brand from Harrisonburg, Virginia to Harrisburg, York and Altoona, Pennsylvania. The Company’s primary service area for the telephone, cable television and long-distance business is Shenandoah County, Virginia. The county is a rural area in northwestern Virginia, with an estimated
population of approximately 41,000 inhabitants, which has increased by approximately 6,000 since 2000. While a number of new housing developments are being planned for Shenandoah County, the Company believes that the potential for significant numbers of additional wireline customers in the Shenandoah County

36

operating area is limited. With the acquisition in December 2008 of cable system assets and customers from Rapid Communications, LLC, through the Company’s Shentel Cable Company subsidiary, the Company has expanded its cable television services to portions of West Virginia and Alleghany County, Virginia.

As a result of the November 30, 2004 acquisition of the 83.9% of NTC Communications, L.L.C. (“NTC”) that the Company did not already own, the Company, through its subsidiary Shentel Converged Services, provides local and long distance voice, video, and Internet services on an exclusive and non-exclusive basis to MDU communities, consisting primarily of off-campus college student housing throughout the southeastern
United States including Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee, Mississippi and Delaware. As of December 31, 2008, Converged Services has been classified as a discontinued operation and its assets and liabilities reclassified as held for sale in the consolidated financial statements.

The Company sells and leases equipment, mainly related to the services it provides. The Company participates in emerging services and technologies by investment in technology venture funds and direct investment in non-affiliated companies.

General

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate), as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, and leased tower facilities. The Company has the following five reporting segments, which it operates and manages as strategic business units organized geographically and by line of business:

telephone, which involves the provision of regulated and non-regulated telephone services, through Shenandoah Telephone Company;

•

mobile, which involves the provision of tower leases and paging services, through Shenandoah Mobile Company;

•

cable television, which involves the provision of analog, digital and high-definition television services, through Shenandoah Cable Television and Shentel Cable Company;

•

other, which involves the provision of Internet, network facility leasing, long-distance, CLEC, and wireless broadband services, through ShenTel Service Company, Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel Communications Company and Converged Services of West Virginia, and the provision of investment and management services to its subsidiaries, through Shenandoah Telecommunications Company.

During the third quarter of 2005, Shenandoah Valley Leasing Company changed its name to Shentel Wireless Company to record the activities associated with the Company’s Wireless Broadband Group. During the fourth quarter of 2006, Shentel Wireless Company terminated all but one contract to provide wireless services, transferred that contract to Shentel Converged Services, Inc., and ceased operations.

The Company is the exclusive provider of wireless mobility communications network products and services on the 1900 MHz band under the Sprint brand from Harrisonburg, Virginia to Harrisburg, York and Altoona, Pennsylvania. The Company’s primary service area for the telephone, cable television and long-distance business is Shenandoah County, Virginia. The county is a rural area in northwestern Virginia, with an estimated population of approximately 41,000 inhabitants, which has increased by approximately 6,000 since 2000. While a number of new housing developments are being planned for Shenandoah County, the Company believes that the potential for significant numbers of additional wireline customers in the Shenandoah County

36

operating area is limited. With the acquisition in December 2008 of cable system assets and customers from Rapid Communications, LLC, through the Company’s Shentel Cable Company subsidiary, the Company has expanded its cable television services to portions of West Virginia and Alleghany County, Virginia.

As a result of the November 30, 2004 acquisition of the 83.9% of NTC Communications, L.L.C. (“NTC”) that the Company did not already own, the Company, through its subsidiary Shentel Converged Services, provides local and long distance voice, video, and Internet services on an exclusive and non-exclusive basis to MDU communities, consisting primarily of off-campus college student housing throughout the southeastern United States including Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee, Mississippi and Delaware. As of December 31, 2008, Converged Services has been classified as a discontinued operation and its assets and liabilities reclassified as held for sale in the consolidated financial statements.

The Company sells and leases equipment, mainly related to the services it provides. The Company participates in emerging services and technologies by investment in technology venture funds and direct investment in non-affiliated companies.

Overview.Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate of Sprint Nextel), as well as cable
television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, paging and leased tower facilities. Following the classification of Converged Services to held for sale, the Company has the following five reporting segments, which it operates and manages as strategic business units organized geographically and by lines of business:

•

wireless personal communications services, or PCS, as a Sprint PCS Affiliate of Sprint Nextel, in portions of Virginia, West Virginia, Maryland and Pennsylvania, through Shenandoah Personal Communications Company;

•

telephone, which involves the provision of regulated and non-regulated telephone services in the Commonwealth of Virginia, through Shenandoah Telephone Company;

•

mobile, which involves the provision of tower leasing and paging services, through Shenandoah Mobile Company;

•

cable TV, which involves the provision of cable television services in Shenandoah County, Virginia, through Shenandoah Cable Television Company; and

•

other, which involves the provision of Internet, network facility leasing, long-distance and CLEC services, through ShenTel Service Company, Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel Communications Company and Converged Services of West Virginia, and the provision of investments and management services to its subsidiaries,
through Shenandoah Telecommunications Company.

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate of Sprint Nextel), as well as cable television, video, Internet and data services, long
distance, sale of telecommunications equipment, fiber optics facilities, paging and leased tower facilities. The Company has the following six reporting segments, which it operates and manages as strategic business units organized geographically and by lines of business:

•

wireless personal communications services, or PCS, as a Sprint PCS Affiliate of Sprint Nextel, in portions of Virginia, West Virginia, Maryland and Pennsylvania, through Shenandoah Personal Communications Company;

•

telephone, which involves the provision of regulated and non-regulated telephone services in the Commonwealth of Virginia, through Shenandoah Telephone Company;

•

converged services, which involves the provision of data, video, voice and long-distance services to multi-dwelling housing units (MDUs, primarily off-campus student housing) in nine states and the District of Columbia, through Shentel Converged Services, Inc.;

•

mobile, which involves the provision of tower leasing and paging services, through Shenandoah Mobile Company;

•

cable TV, which involves the provision of cable television services in Shenandoah County, Virginia, through Shenandoah Cable Television Company; and

•

other, which involves the provision of Internet, network facility leasing, long-distance and CLEC services, through ShenTel Service Company, Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel Communications Company and Converged Services of West Virginia, and the provision of investments and management services to its subsidiaries, through Shenandoah Telecommunications
Company.

Overview. Shenandoah Telecommunications Company is a
diversified telecommunications company providing both regulated and unregulated
telecommunications services through its wholly owned subsidiaries. These
subsidiaries provide local exchange telephone services and wireless personal
communications services (as a Sprint PCS affiliate of Sprint Nextel), as well
as cable television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, paging and leased tower
facilities. The Company has the following six reporting segments, which it
operates and manages as strategic business units organized geographically and
by lines of business:

mobile, which involves the provision of tower leasing and paging
services, through Shenandoah Mobile Company;



cable TV, which involves the provision of cable television services,
through Shenandoah Cable Television Company; and



other, which involves the provision of Internet, network facility
leasing, long-distance and CLEC services, through ShenTel Service Company,
Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel
Communications Company and Converged Services of West Virginia, and the
provision of investments and management services to its subsidiaries, through
Shenandoah Telecommunications Company.

Overview. Shenandoah Telecommunications Company is a
diversified telecommunications company providing both regulated and unregulated
telecommunications services through its wholly owned subsidiaries. These
subsidiaries provide local exchange telephone services and wireless personal
communications services (as a Sprint PCS affiliate of Sprint Nextel), as well
as cable television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, paging and leased tower
facilities. The Company has the following six reporting segments, which it
operates and manages as strategic business units organized geographically and
by lines of business:

mobile, which involves the provision of tower leasing and paging
services, through Shenandoah Mobile Company;



cable TV, which involves the provision of cable television services,
through Shenandoah Cable Television Company; and



other, which involves the provision of Internet, network facility
leasing, long-distance and CLEC services, through ShenTel Service Company,
Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel
Communications Company and Converged Services of West Virginia, and the
provision of investments and management services to its subsidiaries, through
Shenandoah Telecommunications Company.

Overview. Shenandoah
Telecommunications Company is a diversified telecommunications company providing both
regulated and unregulated telecommunications services through its wholly owned
subsidiaries. These subsidiaries provide local exchange telephone services and wireless
personal communications services (as a Sprint PCS affiliate), as well as cable
television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, and leased tower facilities. The
Company has the following six reporting segments, which it operates and manages as
strategic business units organized geographically and by line of business:

mobile, which
involves the provision of tower leases and paging services, through
Shenandoah Mobile Company;

•

cable television,
which involves the provision of analog, digital and high-definition
television services, through Shenandoah Cable Television;

•

other, which
involves the provision of Internet, network facility leasing,
long-distance, CLEC, and wireless broadband services, through ShenTel
Service Company, Shenandoah Network Company, Shenandoah Long Distance
Company and ShenTel Communications Company, and the provision of investment
and management services to its subsidiaries, through Shenandoah
Telecommunications Company.

During the third quarter of
2005, Shenandoah Valley Leasing Company changed its name to Shentel Wireless Company to
record the activities associated with the Company’s Wireless Broadband Group.
During the fourth quarter of 2006, Shentel Wireless Company terminated all but one
contract to provide wireless services, transferred that contract to Shentel Converged
Services, Inc., and ceased operations.

The Company is the exclusive
provider of wireless mobility communications network products and services on the 1900
MHz band under the Sprint brand from Harrisonburg, Virginia to Harrisburg, York and
Altoona, Pennsylvania. The Company’s primary service area for the telephone,
cable television and long-distance business is Shenandoah County, Virginia. The county
is a rural area in northwestern Virginia, with an estimated population of approximately
41,000 inhabitants, which has increased by approximately 6,000 since

37

2000. While a number of new
housing developments are being planned for Shenandoah County, the Company believes that
the potential for significant numbers of additional wireline customers in the
Shenandoah County operating area is limited.

As a result of the November 30,
2004 acquisition of the 83.9% of NTC Communications, L.L.C. (“NTC”) that
the Company did not already own, the Company, through its subsidiary Shentel Converged
Services, provides local and long distance voice, video, and Internet services on an
exclusive and non-exclusive basis to MDU communities, consisting primarily of
off-campus college student housing throughout the southeastern United States including
Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee,
Mississippi and Delaware.

The Company sells and leases
equipment, mainly related to the services it provides. The Company participates in
emerging services and technologies by investment in technology venture funds and direct
investment in non-affiliated companies.

38

General

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate), as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, and leased tower facilities. The Company has the following six reporting segments, which it operates and manages as strategic business units organized geographically and by line of business:

mobile, which involves the provision of tower leases and paging services, through Shenandoah Mobile Company;

•

cable television, which involves the provision of analog, digital and high-definition television services, through Shenandoah Cable Television;

•

other, which involves the provision of Internet, network facility leasing, long-distance, CLEC, and wireless broadband services, through ShenTel Service Company, Shenandoah Network Company, Shenandoah Long Distance Company and ShenTel Communications Company, and the provision of investment and management services to its subsidiaries, through Shenandoah Telecommunications Company.

During the third quarter of 2005, Shenandoah Valley Leasing Company changed its name to Shentel Wireless Company to record the activities associated with the Company’s Wireless Broadband Group. During the fourth quarter of 2006, Shentel Wireless Company terminated all but one contract to provide wireless services, transferred that contract to Shentel Converged Services, Inc., and ceased operations.

The Company is the exclusive provider of wireless mobility communications network products and services on the 1900 MHz band under the Sprint brand from Harrisonburg, Virginia to Harrisburg, York and Altoona, Pennsylvania. The Company’s primary service area for the telephone, cable television and long-distance business is Shenandoah County, Virginia. The county is a rural area in northwestern Virginia, with an estimated population of approximately 41,000 inhabitants, which has increased by approximately 6,000 since

37

2000. While a number of new housing developments are being planned for Shenandoah County, the Company believes that the potential for significant numbers of additional wireline customers in the Shenandoah County operating area is limited.

As a result of the November 30, 2004 acquisition of the 83.9% of NTC Communications, L.L.C. (“NTC”) that the Company did not already own, the Company, through its subsidiary Shentel Converged Services, provides local and long distance voice, video, and Internet services on an exclusive and non-exclusive basis to MDU communities, consisting primarily of off-campus college student housing throughout the southeastern United States including Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee, Mississippi and Delaware.

The Company sells and leases equipment, mainly related to the services it provides. The Company participates in emerging services and technologies by investment in technology venture funds and direct investment in non-affiliated companies.

Except as expressly provided by this letter agreement, the terms and provisions of the Loan Agreement
and the other Loan Documents are hereby ratified and confirmed and shall continue in full force and
effect. By agreeing to this letter agreement as acknowledged below, the Borrower hereby certifies
and warrants to CoBank that after giving effect to the amendment effected hereby, each of its representations
and warranties contained in the Loan Agreement and the other Loan Documents to which it is a party
is true and correct as of the effective date of this letter agreement, including that no Potential
Default or Event of Default exists, with the same effect as though made on such effective date (except
to the extent any such representation or warranty is expressly stated to have been made as of a specific
date, in which case such representation or warranty shall be true and correct as of such specified
date). Without limiting any conditions to effectiveness set forth above, the amendment provided and
agreed to herein is to be effective only upon receipt by CoBank of an execution counterpart of this
letter agreement signed by the Borrower and such amendment is conditioned upon the correctness of
all representations and warranties made by the Borrower herein or as provided to CoBank in connection
with the request for such amendment. The amendment contained herein shall not constitute a course
of dealing between the Borrower and CoBank, shall not constitute a waiver of any other Event of Default,
now or hereafter arising, and, except as expressly provided in connection with the amendment set
forth herein, shall not constitute an amendment of any provision of the Loan Agreement or the other
Loan Documents. The Borrower hereby confirms its obligation to reimburse CoBank for all costs associated
with the negotiation, execution, enforcement and administration of this letter agreement and the
Loan Agreement, including, without limitation, all reasonable outside attorneys fees and expenses incurred by CoBank.

This letter agreement shall be governed by, construed and enforced in accordance with all provisions
of the Loan Agreement and the other Loan Documents.

Sincerely,

COBANK, ACB

By:

/s/ Kurt Morris

Name: Kurt Morris

Title: Vice President

Acknowledged and agreed to:

General

Except as expressly provided by this letter agreement, the terms and provisions of the Loan Agreement
and the other Loan Documents are hereby ratified and confirmed and shall continue in full force and
effect. By agreeing to this letter agreement as acknowledged below, the Borrower hereby certifies
and warrants to CoBank that after giving effect to the amendment and waiver effected hereby, each
of its representations and warranties contained in the Loan Agreement and the other Loan Documents
to which

it is a party is true and correct as of the effective date of this letter agreement, including that
no Potential Default or Event of Default exists, with the same effect as though made on such effective
date (except to the extent any such representation or warranty is expressly stated to have been made
as of a specific date, in which case such representation or warranty shall be true and correct as
of such specified date). Without limiting any conditions to effectiveness set forth above, the amendment
and waiver provided and agreed to herein is to be effective only upon receipt by CoBank of an execution
counterpart of this letter agreement signed by the Borrower and such amendment and waiver is conditioned
upon the correctness of all representations and warranties made by the Borrower herein or as provided
to CoBank in connection with the request for such amendment and waiver. The amendment and waiver
contained herein shall not constitute a course of dealing between the Borrower and CoBank, shall
not constitute a waiver of any other Event of Default, now or hereafter arising, and, except as expressly
provided in connection with the amendment and waiver set forth herein, shall not constitute an amendment
or waiver of any provision of the Loan Agreement or the other Loan Documents. The Borrower hereby
confirms its obligation to reimburse CoBank for all costs associated with the negotiation, execution,
enforcement and administration of this letter agreement and the Loan Agreement, including, without
limitation, all reasonable outside attorneys fees and expenses incurred by CoBank.

This letter agreement shall be governed by, construed and enforced in accordance with all provisions
of the Loan Agreement and the other Loan Documents.

Sincerely,

COBANK, ACB

By:

Name: Kurt Morris

Title: Vice President

Acknowledged and agreed to:

General

Overview.
Shenandoah Telecommunications Company is a diversified telecommunications
company providing both regulated and unregulated telecommunications services
through its wholly owned subsidiaries. These subsidiaries provide local
exchange telephone services and wireless personal communications services (as a
Sprint PCS affiliate of Sprint Nextel), as well as cable television, video,
Internet and data services, long distance, sale of telecommunications
equipment, fiber optics facilities, paging and leased tower facilities. The
Company has the following six reporting segments, which it operates and manages
as strategic business units organized geographically and by lines of
business:

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated
and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries
provide local exchange telephone services and wireless personal communications services (as a Sprint
PCS affiliate of Sprint Nextel), as well as cable television, video, Internet and data services,
long distance, sale of telecommunications equipment, fiber optics facilities, paging and leased tower
facilities. The Company has the following six reporting segments, which it operates and manages as
strategic business units organized geographically and by lines of business:

Overview. Shenandoah Telecommunications Company is a
diversified telecommunications company providing both regulated and unregulated
telecommunications services through its wholly owned subsidiaries. These
subsidiaries provide local exchange telephone services and wireless personal
communications services (as a Sprint PCS affiliate of Sprint Nextel), as well
as cable television, video, Internet and data services, long distance, sale of
telecommunications equipment, fiber optics facilities, paging and leased tower
facilities. The Company has the following six reporting segments, which it
operates and manages as strategic business units organized geographically and
by lines of business:

Overview. Shenandoah
Telecommunications Company is a diversified telecommunications company
providing both regulated and unregulated telecommunications services through
its wholly owned subsidiaries. These subsidiaries provide local exchange
telephone services and wireless personal communications services (as a Sprint
PCS affiliate), as well as cable television, video, Internet and data services,
long distance, sale of telecommunications equipment, fiber optics facilities,
paging and leased tower facilities. The Company has the following six reporting
segments, which it operates and manages as strategic business units organized
geographically and by line of business:

During
the third quarter of 2005, Shenandoah Valley Leasing Company changed its name
to Shentel Wireless Company to record the activities associated with the
Companys Wireless Broadband Group. During the fourth quarter of 2006, Shentel
Wireless Company terminated all but one contract to provide wireless services,
transferred that contract to Shentel Converged Services, Inc., and ceased
operations.

The
Company is the exclusive provider of wireless mobility communications network
products and services on the 1900 MHz band under the Sprint brand from
Harrisonburg, Virginia to Harrisburg, York and Altoona, Pennsylvania. The
Companys primary service area for the telephone, cable television and
long-distance business is Shenandoah County, Virginia. The county is a rural
area in northwestern Virginia, with a population of approximately 39,000
inhabitants, which has increased by approximately 4,000 since 2000. While a
number of new housing developments are being planned for Shenandoah County, the
Company

38

believes
that the potential for significant numbers of additional wireline customers in
the Shenandoah County operating area is limited. In 2002, the Company
established a competitive local exchange carrier in Virginia to provide
services outside of its regulated telephone service area on a limited basis.

As a
result of the November 30, 2004 acquisition of the 83.9% of NTC Communications,
L.L.C. (NTC) that the Company did not already own, the Company, through its
subsidiary Shentel Converged Services, provides local and long distance voice,
video, and Internet services on an exclusive and non-exclusive basis to MDU
communities, consisting primarily of off-campus college student housing
throughout the southeastern United States including Virginia, North Carolina,
Maryland, South Carolina, Georgia, Florida, Tennessee and Mississippi.

The
Company sells and leases equipment, mainly related to the services it provides.
The Company participates in emerging services and technologies by investment in
technology venture funds and direct investment in non-affiliated companies.

Allocations. In connection with the adoption of a new
affiliates agreement which was approved by the Virginia State Corporation
Commission effective January 1, 2005, and pursuant to assignment and assumption
agreements between Shentel Management Company and Shenandoah Telephone Company,
and the Companys other subsidiaries, effective January 1, 2005, all employees
and certain assets and liabilities of these subsidiaries were transferred to
Shentel Management Company which is now the entity through which all shared
services and shared assets are provided to all existing and future affiliates
of the Company. The new affiliates agreement had no impact on the consolidated
financial statements, but it has affected the allocation of costs amongst the
Companys subsidiaries. These costs are included in cost of goods and services
and selling, general and administrative expenses in the Companys consolidated
statements of income. Total allocated costs decreased $1.1 million from 2005 to
2006. The PCS segment benefited most from the changes in allocation, as its
allocated costs declined by $2.4 million in 2006 from 2005. The Converged
Services segment was allocated $1.0 million more in 2006 than 2005, due to
additional labor hours charged to various projects (including the customer
interface/billing system project, roll-out of new properties, and equipment
upgrades and maintenance issues), as well as to additional management focus on
this segment.